Stoland Pty Ltd v Peter James Thurn & Ano [1997] FCA 1587 (18 December 1997)

Last Updated: 4 November 1998

FEDERAL COURT OF AUSTRALIA

CORPORATIONS - proceedings under ss 592, 588M and 588R - whether immediately before particular debts were incurred there were reasonable grounds to expect that the company would not be able to pay all its debts as and when they become due - whether for the purposes of ss 588M and 588R proceedings were begun under s 588M when the amended application and statement of claim were filed or when the original initiating process was filed.

Corporations Law, s 592, s 588M, s 588R, s 588G

Federal Court of Australia Act 1976, s 59(2B)

Federal Court Rules O 13 r 2(3)

Standard Chartered Bank of Australia Ltd v Antico (1995) 18 ACSR 1

Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115

Weldon v Neal (1887) 19 QBD 394

Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514

Harris v Western Australian Exim Corporation (1994) 129 ALR 387

Commonwealth of Australia v International Air Aid Pty Ltd 2 September 1994 unreported, FCA Neaves J

STOLAND PTY LIMITED v PETER JAMES THURN and WILLIAM GARY QUICK

NG 3165 of 1994

LEHANE J

18 DECEMBER 1997

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 3165 of 1994

BETWEEN:	STOLAND PTY LIMITED Applicant
AND:	PETER JAMES THURN First Respondent WILLIAM GARY QUICK Second Respondent
JUDGE:	LEHANE J
DATE OF ORDER:	18 DECEMBER 1997
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. Judgment be entered for the applicant against the second respondent for the sum of $241,249.73 together with interest on that sum calculated from 1 September 1993 to the date of judgment at the rate or rates provided for in Schedule J to the Supreme Court Rules (NSW).

2. The second respondent is to pay the applicant's costs of the proceeding other than those aspects of the proceeding as to which particular orders for the taxation and payment of costs have previously been made.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 3165 of 1994

BETWEEN:	STOLAND PTY LIMITED Applicant
AND:	PETER JAMES THURN First Respondent WILLIAM GARY QUICK Second Respondent

JUDGE:	LEHANE J
DATE:	18 December 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

The applicant (Stoland) seeks to recover from the second respondent (Mr Quick) the aggregate amount (together with interest) of debts incurred, for goods sold by Stoland, by a company now in liquidation, Cazihaven Homes Pty Ltd (the Company). Mr Quick was (it is common ground) a director of the Company at the time when each of the debts was incurred. As to debts incurred before 23 June 1993, Stoland's claim is made under s 592 of the Corporations Law (the Law); for debts incurred on and after that date the claim is made under ss 588M and 588R of the Law.

Facts

Although Mr Quick's defence put in issue all the substantial elements of Stoland's claims, the issues as to which there was real dispute between the parties were substantially narrowed in the course of the hearing. It is common ground that an administrator of the Company was appointed on 13 October 1993 under s 436A of the Law and that the Company was wound up in accordance with a resolution of its creditors passed, on 10 November 1993, under s 439C of the Law. Stoland read evidence as to the incurring of the debts, payment of the amount of which is claimed from Mr Quick. The evidence was not challenged; indeed, counsel for Mr Quick accepted tha't each of the debts claimed was incurred by the Company, for goods supplied to it, on the date of the invoice for the debt appearing in the evidence. On that footing, between 1 June 1992 and 22 June 1993 debts were incurred amounting to $219,556.05 and, between 23 June 1993 and 31 August 1993, debts amounting to $21,963.68. There is evidence, which is undisputed, that those amounts remain unpaid. The debts are unsecured. There is evidence, also undisputed, of an employee of the liquidator of the Company that unsecured creditors of the Company have received no distribution in the liquidation and will receive none.

Statutory provisions

The first four subsections of s 592 of the Law provide as follows:

592 (1) Where:

(a) a company has incurred a debt before the commencement of Part 5.7B;

(b) immediately before the time when the debt was incurred:

(i) there were reasonable grounds to expect that the company will not be able to pay all its debts as and when they become due; or

(ii) there were reasonable grounds to expect that, if the company incurs the debt, it will not be able to pay all its debts as and when they become due; and

(c) the company was, at the time when the debt was incurred, or becomes at a later time, a company to which this section applies;

any person who was a director of the company, or took part in the management of the company, at the time when the debt was incurred contravenes this subsection and the company and that person or, if there are 2 or more such persons, those persons are jointly and severally liable for the payment of the debt.

(2) In any proceedings against a person under subsection (1), it is a defence if it is proved:

(a) that the debt was incurred without the person's express or implied authority or consent; or

(b) that at the time when the debt was incurred, the person did not have reasonable cause to expect:

(i) that the company would not be able to pay all its debts as and when they became due; or

(ii) that, if the company incurred that debt, it would not be able to pay all its debts as and when they became due.

(3) Proceedings may be brought under subsection (1) for the recovery of a debt whether or not the person against whom the proceedings are brought, or any other person, has been convicted of an offence under subsection (1) in respect of the incurring of that debt.

(4) In proceedings brought under subsection (1) for the recovery of a debt, the liability of a person under that subsection in respect of the debt may be established on the balance of probabilities.

Part 5.7B of the Law commenced on 23 June 1993. Thus, of the debts claimed, an amount of $219,556.05 was incurred before Pt 5.7B commenced. The Company is one to which s 592 applies because it is a company that has been wound up or is in the course of being wound up (s 589(1)(a)); Mr Quick was a director of the Company when each of the debts was incurred. Mr Quick gave no evidence and none was read in his case: no defence under subs (2) was made out. The substantial issue between the parties arising under s 592, is, accordingly, whether para (1)(b) applies: particularly, in relation to each debt, whether immediately before it was incurred there were reasonable grounds to expect that the Company would not be able to pay all its debts as and when they became due.

The scheme of Pt 5.7B, which applies to the debts incurred from 23 June 1993, is rather different. The commencing point is s 588G, subss (1) and (2) of which provide:

588G (1) This section applies if:

(a) a person is a director of a company at the time when the company incurs a debt; and

(b) the company is insolvent at that time, or becomes insolvent by incurring that debt, or by incurring at that time debts including that debt; and

(c) at that time, there are reasonable grounds for suspecting that the company is insolvent, or would so become insolvent, as the case may be; and

(d) that time is at or after the commencement of this Part.

(2) By failing to prevent the company from incurring the debt, the person contravenes this section if:

(a) the person is aware at that time that there are such grounds for so suspecting; or

(b) a reasonable person in a like position in a company in the company's circumstances would be so aware,

Section 95A tells us what is meant by solvency and insolvency:

(1) A person is solvent if, and only if, the person is able to pay all the persons' debts, as and when they become due and payable.

Subsection (2) provides that a person who is not solvent is insolvent. Section 588H provides for defences in terms which are similar to those of s 592(2); again, Mr Quick did not seek to make out such a defence.

Section 588M then provides for recovery, as follows:

588M (1) This section applies where:

(a) a person (in this section called the "director") has contravened section 588G in relation to the incurring of a debt by a company; and

(b) the person (in this section called the "creditor") to whom the debt is owed has suffered loss or damage in relation to the debt because of the company's insolvency;

(c) the debt was wholly or partly unsecured when the loss or damage was suffered; and

(d) the company is being wound up;

whether or not:

(e) the director has been convicted of an offence in relation to the contravention; or

(f) a civil penalty order has been made against the director in relation to the contravention.

(2) The company's liquidator may recover from the director, as a debt due to the company, an amount equal to the amount of the loss or damage.

(3) The creditor may, as provided in Subdivision B but not otherwise, recover from the director, as a debt due to the creditor, an amount equal to the amount of the loss or damage.

The provision of Subdiv B which is relevant for present purposes is s 588R, subs (1) of which provides:

A creditor of a company that is being wound up may, with the written consent of the company's liquidator, begin proceedings under section 588M in relation to the incurring by the company of a debt that is owed to the creditor.

The application by which this proceeding was commenced was filed on 3 May 1994. It sought recovery of the sum of $241,250, including (the accompanying statement of claim makes clear) debts incurred both before and after Pt 5.7B commenced. The application, however, was expressed as one made (only) pursuant to s 592 and the statement of claim pleaded the case only on the basis of s 592. It is, I think, not unfair to infer that the pleader simply overlooked the fact that Pt 5.7B commenced before some of the debts were incurred. It is unnecessary to retrace in detail some of the unfortunate history of this matter: I have done so sufficiently in earlier interlocutory judgments. It is necessary to record, however, that on 16 October 1997, on Stoland's application, I gave Stoland leave to file and serve an amended application and an amended statement of claim. The amended application and amended statement of claim were filed in Court on that day. The amended application includes a claim under Pt 5.7B and the statement of claim pleads such a claim in appropriate terms. There is an issue, however, whether Stoland is entitled to maintain the present proceeding, so far as it relies on Pt 5.7B. Stoland relies on a letter of 12 June 1997 from the liquidator to Stoland's solicitors by which the liquidator "now consents to your client commencing proceedings pursuant to Section 588M of the Corporations Law". Mr Quick, however, contends that proceedings have not been begun with that consent, but that the proceedings are those begun in 1994, well before the consent was given. The question, therefore, is whether for the purposes of ss 588M and 588R proceedings were begun purportedly under s 588M in relation to the incurring by the Company of debts on and after 23 June 1993, on 16 October 1997 when the amended application and statement of claim were filed, or on 3 May 1994 when the original initiating process was filed.

Insolvency; reasonable grounds

Stoland relied on evidence in the form of a report of Mr Martin Madden and certain documents annexed to the report. Mr Madden is a registered auditor and a registered and official liquidator. He is a division head of the corporate recovery services practice in Sydney and for the Asia Pacific Group of Arthur Andersen. There was no dispute about the sufficiency of Mr Madden's qualifications. He was not cross-examined. Mr Madden was asked by Stoland's solicitors to perform a review of the Company's financial position and to form an opinion as to its solvency, "namely the ability of the Company to pay its debts as and when they fall due," for the period October 1991 to 13 October 1993. Mr Madden was provided with several boxes of documents, including books and records produced by the liquidator and documents produced under subpoena by two firms, respectively Cameron, Deane-Butcher, Hooper & Co (CDH) and Horwath & Horwath (NSW) Pty Ltd (Horwath) which acted successively as external accountants of the Company. He gave evidence that he had intended to reconstruct the financial accounts of the Company for the periods ended 30 September 1991, 31 December 1991, 30 September 1992, 31 December 1992 and 31 March 1993 and to perform a detailed review of certain special purpose financial statements prepared by Horwath for the years ended 30 June 1992 and 30 June 1993. However, Mr Madden said, he was unable to do that because of the absence from the material produced to him of primary accounting records and secondary documentation. In that state of affairs, for the purpose of forming an opinion as to the Company's solvency Mr Madden reviewed its working capital and net asset positions. He performed that review on the basis of information specifically extracted from special purpose financial statements prepared by CDH for the periods ended 30 June 1991 and 29 February 1992 and similar statements prepared by Horwath for the periods ended on 30 June 1992 and 30 June 1993; Mr Madden also referred to a report as to the affairs of the Company dated 25 October 1993 and submitted to the administrator of the Company. He noted that the "special purpose accounts" were not audited and were based on information contained in the Company's records or provided by the directors, "as opposed to general purpose accounts which are prepared by management and audited by an independent external accountant".

Mr Madden then expressed conclusions as to the financial position of the Company before and at 29 February 1992, at 30 June 1992, and at 30 June 1993. His conclusion was that at each of those dates the Company was insolvent. As to the position at 29 February 1992 and earlier, Mr Madden's summary of the special purpose accounts as at 29 February 1992 showed a deficiency of assets of $236,522 and a working capital deficiency of $98,362. He noted that trade creditors had increased from $155,000 at 30 June 1991 to $416,684 at
29 February 1992. He noted, additionally, that the deficiency of assets increased to $253,592 when amounts receivable from related parties were written down to zero: that was appropriate, he said, given that the Company's cash book indicated that those amounts were not in fact repaid. Mr Madden also relied on a letter dated 10 April 1992 addressed to Mr P Thurn (the first respondent), also a director of the Company. The letter reads as follows:

With reference to the accounts to 29th February 1992, prepared from information you supplied to us, which shows a loss for the eight months then ended of $267,895 it would appear that Cazihaven Homes Pty Limited is insolvent.

We have discussed details of this with you on the 13th March 1992 with Bill Quick on the 20th March 1992 and with you and Bill on the 27th March 1992.

You have informed us of taking action to find the problem giving rise to this loss however to date we are not aware of your success. You have informed us of putting further funds into Cazihaven Homes Pty Limited vis $200,000 however this can only be a temporary fix. Unless the cause of the loss is isolated and fixed immediately Cazihaven Homes Pty Limited will be insolvent.

Given the above we urge to seek independent legal advice as to your position.

Mr Madden concluded that at 29 February 1992 the Company would have been unable to repay its creditors as and when they fell due.

Mr Madden then considered the position at 30 June 1992. He noted that the special purpose accounts prepared as at that date by Horwath showed "an alleged significant turnaround in the Company's financial position": in the four months which had elapsed since 29 February 1992 work in progress had increased by 109%, trade creditors had decreased by 43% and the bank overdraft had increased by 111%. The accounts show net assets of $37,817 and current assets exceeding current liabilities by $148,828. However, Mr Madden noted that the balance sheet at 30 June 1992 included loans to the directors of $54,909 which, the cash book indicated, were not recovered: if those loans were written down to their recoverable value of zero, the balance sheet would have shown a deficiency of assets of $17,092. On that footing, Mr Madden concluded that the Company was insolvent at 30 June 1992.

At 30 June 1993, Mr Madden concluded that the Company was clearly insolvent: the special purpose accounts prepared by Horwath as at that date showed a deficiency of assets of $723,399 and a deficiency of working capital of $577,455: if loans to directors were written down to their recoverable value of zero, the balance sheet would have shown a deficiency of assets of $777,128. Mr Madden commented that the decline in the Company's position since 1 July 1992 thus recorded confirmed his opinion that the Company was insolvent as at
30 June 1992.

Mr Madden then referred to a number of other matters arising from his review of the documentation which confirmed his opinion: particularly, correspondence with creditors and financiers. There was, for example, a letter signed by Mr Thurn on the Company's letterhead addressed, apparently, to a supplier. The letter stressed the Company's reliance on progress payments, which, it said, had "been few and far between". The letter then referred to a loan from St George Building Society, apparently for the purpose of financing the construction of a number of houses. The letter concluded:

I appreciate your ongoing support & knowing times are hard, will forward you a cheque at my earliest convenience. Attached is confirmation of the loan from St George. For any further discussion please don't hesitate to contact me at home on 318 725.

Then there was a handwritten document signed by Mr Thurn "releasing" a bobcat to a creditor as part payment of a debt for plumbing works. The document was written as if on behalf of Mr Thurn personally, but it was, on the evidence, with the Company's records and I think it is a fair inference, and in the absence of any contrary evidence I infer, that it referred to an obligation, and property, of the Company. The document is dated 14 January 1993. Then there was a letter of 3 June 1993 on the Company's letterhead, addressed to Stoland and signed by Mr Thurn, as follows:

RE: OUTSTANDING ACCOUNT OF $242,000-00

We regret to advise you that we are unable to pay this debt at this time due to unforeseen circumstances that have put pressure on our ability to meet our liabilities.

If there should be a change in our position, we will advise you accordingly, however the immediate future appears extremely clouded.

Finally, there was a letter, again signed by Mr Thurn on the Company's letterhead, to the ANZ Bank dated 13 July 1993 referring to "jobs started already to commence" and projects tendered for, and concluding:

Although all this may sound & look good, we are still operating with very small profit margins and at times, taking into calculation our overheads, we are only breaking even, and at this stage we are still unable to operate without the assistance of the Bank through its overdraft facility.

All we can hope is that your support of us remains as strong as it has been in the past.

Mr Madden's overall conclusion was that the Company was insolvent prior to 29 February 1992 and continued to be insolvent up to the appointment of the Administrator on 13 October 1993. Mr Madden's summary of the position as shown in the statement of affairs indicates a working capital deficiency of $658,477 and total liabilities exceeding total assets by $657,477. It is worth mentioning that, according to the statement of affairs, "inventories" which at 30 June 1991 had been recorded as $299,590, at 22 February 1992 as $223,670, at 30 June 1992 as $466,464 and at 30 June 1993 at $182,543, had reduced to zero at 13 October 1993. The only current asset listed was receivables of $18,164. The only non-current asset at 13 October 1993 was recorded as plant and equipment valued at $1,000. The recorded liabilities at 13 October 1993 were creditors and provisions, $676,641. It is hardly surprising that creditors have recovered nothing from the liquidation.

On the material before the Court, I think the correct conclusion to reach is that which Mr Madden reached: by 29 February 1992 and at all times after that date the Company was unable to pay its debts as they fell due. On the basis of the special purpose accounts, and in the absence of any other material, it would be difficult to reach any other conclusion but for the accounts as at 30 June 1992. Mr Madden's conclusion as to the position at that date, however, should in my view be accepted. I have already referred to the remarkable fluctuation in the amount recorded for inventories. The dip, at 30 June 1992, in current liabilities is in the context no less remarkable. There is no indication in the evidence as to the date on which the accounts as at 30 June 1992 were prepared: but it is worthy of note that the transaction with the bobcat occurred in January 1993 and, of course, by 30 June 1993 and, having regard to the special purpose accounts as at that date, it could hardly be asserted that on 30 June 1993 the Company was solvent: the figures indicate that at that date it was hopelessly insolvent. Mr Madden, in my opinion, was justified in treating that circumstance as supporting his conclusion that the Company was insolvent at 29 February 1992, remained so at 30 June 1992 and continued in that condition until it was wound up.

It does not follow from that conclusion that Mr Quick is liable in respect of the debts claimed by Stoland. He is liable for any of the debts incurred before 23 June 1993 only if, at the time that debt was incurred, either:

(i) there were reasonable grounds to expect that the company will not be able to pay all its debts as and when they become due; or

(ii) there were reasonable grounds to expect that, if the company incurs the debts, it will not be able to pay all its debts as and when they become due;...

(S 592(1)).

A similar question would arise, under s 588G(1), in relation to each of the debts incurred on or after 23 June 1993: the statutory question, under that provision, is whether:

(c) at that time, there were reasonable grounds for suspecting that the company is insolvent, or would so become insolvent, as the case may be; ...

and there is the further requirement (s 588G(2)) that:

(a) [Mr Quick] is aware at that time that there are such grounds for so suspecting; or

(b) a reasonable person in a like position in a company in the company's circumstances would be so aware.

Counsel for Mr Quick pointed to the fact that, alone among the copies of the special purpose accounts before the Court, the copy accounts as at 30 June 1992 have been signed by both directors, Mr Quick and Mr Thurn; in the statement by the directors, which they have signed, there appears an expression of opinion by the directors that, at the date of the statement, there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due. That might, perhaps, be taken as an indication that the directors had given some consideration to the subject and formed the opinion stated. It does not, however, of itself provide an answer to the statutory question about reasonable grounds. It is also, I think, not irrelevant to observe that, although it is not signed, the accounts prepared by the same accountants for the year ended 30 June 1993, as printed, incorporate the same statement of opinion in circumstances where it could hardly be justified: it is difficult to resist the impression that it is a standard form on a word processor.

Counsel for Mr Quick referred me to the discussion of s 592 by Hodgson J in Standard Chartered Bank of Australia Ltd v Antico (1995) 18 ACSR 1 at 70 ff, particularly at 74-79. Here there is no evidence of what Mr Quick actually knew. Nor is there any evidence as to the part played by Mr Quick in the management of the affairs of the Company. Mr Quick should, however, be expected to be capable of understanding the affairs of the Company "to the extent of reaching a reasonably informed opinion of its financial capacity": Standard Chartered Bank at 74, 75. Because there is no evidence as to particular facts actually within Mr Quick's knowledge, it is appropriate to apply the test stated by Tadgell J in Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 at 124, cited by Hodgson J in Standard Chartered Bank at 75:

The plaintiff must prove facts which, immediately before the time when the company incurred the relevant debt, gave a person seeking properly to perform the duties of a non-executive director of that company reasonable grounds to say: "I expect that the company will not be able to pay all its debts as and when they become due".

I accept, as Hodgson J did at 75, that undue effect should not be given to the wisdom of hindsight. I accept also that, as Tadgell J points out in the passage cited from Friedrich, Stoland must prove its case: Mr Quick is not to be criticised for putting Stoland to proof of those matters which it must establish. On the other hand, where there is material before the Court capable of proving actual insolvency, and where the material from which that conclusion might be derived was available to Mr Quick at the time when the debts were incurred, it is difficult to resist the conclusion that a reasonable director, in the position of Mr Quick, would have had reasonable grounds to say at the time when each debt was incurred: "I expect that the company will not be able to pay all its debts as and when they become due". The Court will be the more ready to come to that conclusion in circumstances where the director concerned has chosen not to give or lead any evidence: it may be inferred that any evidence which a director could give or lead would not assist the director's case. Little weight should, in my view, be given to the fact that Mr Quick signed what appears to be a standard form directors' statement where he offered no evidence of the circumstances in which he did so or the matters to which he had regard in forming the opinions stated.

Accordingly, in my view, Stoland succeeds in its claim based on s 592 in respect of the debts incurred before 23 June 1993. But for the argument based on s 588R, to which I shall turn, the same result would follow a fortiori under ss 588M and 588R as to the debts incurred on and after 23 June 1993: a fortiori, both because by that time the Company was plainly insolvent and had confessed its difficulties in the letter to Stoland signed by Mr Thurn and because the test under the new provisions, where actual insolvency is established, is no more stringent than the test under s 592: indeed, in one respect it is less so, "suspect" having replaced "expect".

When is a proceeding under s 588M begun?

Section 588R permits a creditor, with the written consent of the liquidator, to "begin proceedings under section 588M". Section 588M(4) establishes a limitation period for proceedings under s 588M, and is expressed similarly:

Proceedings under this section may only be begun within 6 years after the beginning of the winding up.

There can be little doubt that if the winding up of the Company had begun less than six years before the filing of the initial application in this proceeding, proceedings under the section would be regarded as begun within six years after the beginning of the winding up even if (as in fact is not the case) leave had been granted to amend the application and statement of claim, and the amendments had been made, more than six years after the beginning of the winding up: Weldon v Neal (1887) 19 QBD 394; Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514; Harris v Western Australian Exim Corporation (1994) 129 ALR 387; Federal Court of Australia Act 1976 , s 59(2B); Federal Court Rules O 13 r 2(3). (It may be that a conditional order could be made, the effect of which would be to avoid that consequence: Commonwealth of Australia v International Air Aid Pty Ltd 2 September 1994 unreported, FCA Neaves J). The proceeding in which, following the amendments, Stoland seeks relief under
s 588M was in that sense begun in 1994 when the initial application was filed and, of course, before the liquidator gave his consent under s 588R(1).

In my view, however, it does not follow that Stoland began proceedings under s 588M without the written consent of the liquidator. The proceeding, when it was begun, was not a proceeding under s 588M: it sought relief only under s 592 and only on a cause of action based on that section. The proceeding has been (in part) one under s 588M only since the amendments were made; and the amendments were made only after the liquidator had given his written consent. If the effect of the amendment was that the proceeding was to be treated (for limitation purposes, for example) as begun in 1994, nevertheless it became, by virtue of the amendments, a proceeding under s 588M only after the liquidator's written consent had been given. In that sense, at least, the proceeding, to the extent that it acquired the character of a claim under s 588M, acquired that character only after the consent was given. That being so, it seems to me no misuse of language to say that Stoland began proceedings under s 588M with the written consent of the Company's liquidator.

It is, after all, to be borne in mind that s 109H of the Law provides that:

In the interpretation of a provision of this Law, a construction that would promote the purpose or object underlying the Law (whether that purpose or object is expressly stated in the Law or not) is to be preferred to a construction that would not promote that purpose or object.

The purpose or object of s 588R(1) is that, with exceptions for which the later subsections provide, a creditor should not take proceedings against a director of a company in liquidation to recover a debt owed by the company, unless the liquidator consents. In circumstances such as the present, that purpose is served equally if, with the liquidator's consent, a claim is added in proceedings already on foot as by the commencement of separate proceedings. There can be no doubt, in this case, that once the liquidator's consent had been given, Stoland might have commenced a separate proceeding in which it claimed relief under s 588M in precisely the same terms as it has done by the amendment. There can be little doubt that, if it had done so, the Court if asked would have ordered that the two proceedings be heard together, evidence in one being evidence in the other. But the literal words of the section do not, in my view, mean that only a new application will suffice, and there is nothing in the purpose of s 588R(1) which indicates that such a construction is to be preferred.

That being so, Stoland is entitled to recover against Mr Quick, as well as the amount of the debts incurred before 23 June 1993, the loss or damage suffered by Stoland, in relation to the debts incurred later, because of the Company's insolvency; and the amount of the loss or damage is, in the circumstances, the aggregate amount of the debts, together with interest.

Conclusion

Accordingly, in my view, Stoland is entitled to judgment against Mr Quick for the sum of $241,249.73 (as claimed in the amended application). By the amended applications, Stoland claimed interest calculated for 1 September 1993, and it is entitled to that interest. Mr Quick should pay Stoland's costs of the proceeding other than those aspects of it in relation to which particular orders for costs have already been made.

The orders of the Court are that:

1. Judgment be entered for the applicant against the second respondent for the sum of $241,249.73 together with interest on that sum calculated from 1 September 1993 to the date of judgment at the rate or rates provided for in Schedule J to the Supreme Court Rules (NSW).

2. The second respondent is to pay the applicant's costs of the proceeding other than those aspects of the proceeding as to which particular orders for the taxation and payment of costs have previously been made.

I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane

Associate:

Dated: 18 December 1997

Counsel for the Applicant:	Mr M Cashion SC
Solicitor for the Applicant:	Kemp Strang & Chippindall
Counsel for the Respondent:	Mr J T Johnson
Solicitor for the Respondent:	Ward Maxwell & Co
Date of Hearing:	11 December 1997
Date of Judgment:	18 December 1997